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Tracsis (LSE:TRCS), a prominent transport technology provider, has released its trading update for the fiscal year ending July 31, 2024. The company's performance aligns with its revised guidance, reflecting a stable financial trajectory despite some challenges:
- Revenue: Group revenue is projected to exceed £81.0 million, slightly down from £82.0 million in the previous year.
- Adjusted EBITDA: Expected to be around £13.0 million, compared to £16.0 million in 2023, resulting in an adjusted EBITDA margin of approximately 16%.
- Cash Balances: The company’s cash reserves grew by over £4 million since the end of May 2024, reaching £19.8 million as of July 31, 2024, up from £15.3 million in the prior year. This robust cash position provides Tracsis with the flexibility to invest in technology and pursue growth opportunities.
Commercial Progress
Tracsis has made notable strides in its operational growth strategy over the past year:
- Organic Revenue Growth: The Rail Technology and Services Division in the UK achieved double-digit organic revenue growth, despite restrictions related to the UK General Election in the final two months of the fiscal year. The division also saw increased rail technology license usage and recurring revenue.
- New Contracts: The company secured new contracts in smart ticketing and delay repay, and advanced to the next funded phase of RailHub development with Network Rail.
- Pipeline Expansion: Tracsis' pipeline of major software opportunities in the UK and North America more than doubled over the year.
- New Product Development: The launch of a new Computer Aided Dispatch product ("PTC BOS") in North America opens up significant new market opportunities.
- Customer Renewals: Several major customers in the Data, Analytics, Consultancy, and Events Division renewed their contracts for FY25, bolstering future expectations.
Operational Model Transformation
Tracsis has undertaken a comprehensive transformation of its operating model to enhance long-term growth and profitability:
- Optimisation: Actions included restructuring the organisation, integrating Rail Technology UK businesses, and upgrading IT and software systems.
- Portfolio Re-focus: The company is shifting its focus to higher-margin, fast-growing activities and will no longer pursue certain non-software contracts. This strategic pivot will result in a short-term revenue decrease of around £5 million and a corresponding drop in EBITDA but is expected to align with Tracsis' growth strategy.
- Exceptional Costs: Non-repeat exceptional costs related to the operating model transformation are estimated at approximately £3 million for the full year, including £1.3 million disclosed in interim results.
Future Outlook
Tracsis is well-positioned for sustained growth, driven by its strengthened operating model and focus on high-margin software opportunities. The company continues to build a significant pipeline of software projects in the UK and North American rail technology markets, aligning with the industry's shift towards digital solutions. This positions Tracsis for robust growth in the coming financial year and beyond.
